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Firms Slow To Adapt To New Transfer Pricing Challenges: Survey

by Mike Godfrey,, Washington

22 November 2016

75 percent of businesses identify tax risk management as their top transfer pricing priority, according to a survey of 623 tax and finance executives across 36 countries.

The survey, conducted by Ernst and Young, found that 21 percent of businesses lack operational readiness to adapt to changing transfer pricing conditions and only 21 percent are fully compliant with global documentation rules.

69 percent of respondents said establishing a clear vision and strategy is the best approach to addressing operational issues relating to transfer pricing. However, only 35 percent described their readiness to do so as "high." And with many businesses still hindered by manual systems and processes, 49 percent identified lack of automation as the most difficult challenge they are facing in adapting their operating model.

Peter Griffin, EY Global Transfer Pricing Leader, said: "A new era of tax transparency is driving monumental change throughout modern tax functions, and businesses need to begin gathering essential data to build a clearer and more optimized long-term strategy for transfer pricing. Adapting to this new reality will be key to executing effective and compliant transfer pricing. With 73 percent of survey respondents still monitoring transfer pricing results on just a quarterly or annual basis, it is clear that a significant step change still needs to take shape."

Griffin added: "As governments increasingly move toward real-time reporting processes and the focus on transfer pricing intensifies, businesses need to evaluate the tools available to align their transfer pricing activities with information technology reporting systems. Relying on periodic, ad hoc manual adjustments is no longer enough and could be costly both in terms of time and resources."

TAGS: compliance | Transfer Pricing | tax | investment | business | tax compliance | tax avoidance | law | tax authority | agreements | multinationals | tax planning | transfer pricing | trade | BEPS

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